Breaking News! & Differences Between Mortgage Banking and Mortgage Brokerage

First the News!

We finally got word today from one of our lenders
with whom we broker loans that they will start
accepting registrations for the new conforming-
jumbo loan limits to $697,500 in San Diego
beginning April 27.

The conforming limit is currently $417,000.
The Economic Stimulus Act of 2008 allowed FHLMC
and FNMA to purchase loans up to $697,500 in San
Diego. At the end of 2008, that figure was
reduced to $546,250 in San Diego.

The 2009 American Recovery and Reinvestment Act
(ARRA) was passed in February and allowed for
the reinstatement of the higher $697,500 limit
in San Diego. We have been waiting for two months
to see that the guidelines have been finalized
and that lenders would start accepting applications
for the higher limits.

The reason this is a big deal for borrowers is
because the jumbo loans - those above $417,000
traditionally - have not been readily available
and when they have been offered, it has been at
significantly higher rates and fees.

The conforming-jumbo loans at the higher limit
will allow more borrowers to finance at affordable
interest rates, and that is going to help a lot
of people.


MORTGAGE BROKERAGE AND MORTGAGE BANKING


As I work with clients and facilitate their
requests for home loans, there are a couple
of different ways I can represent their interests.

As a mortgage broker, I serve as an advocate for
you, the borrower, with the lender.

I help you complete the mortgage application,
educate you as to available loan programs and
costs, and counsel you on any concerns and
possible solutions that could affect your loan
approval.

The lenders make their loan products available
to us through what they call their wholesale
division. It is called that because they
offer their interest rates and fees at a
"wholesale" price to us and allow us to earn
our compensation for the work we do.

When lenders create loans directly, that is
commonly called their retail operation. The
rates and fees that they charge are competitive
with what we charge as mortgage brokers. They
then pay their staff for the work that they
do for the lenders as employees.

So, you should find that the quotes you receive
from the lenders directly or through mortgage
brokers to be very similar. If that were not
the case, one or the other would not be able to
compete and would cease to be a player in the
mortgage market.

Based on our knowledge, experiences and resources,
we package your loan for presentation to the
lender. We do not have any direct ability to
approve your loan, but we are well-versed in the
guidelines for your loan request and can often
persuasively influence the underwriter to approve
your loan if there are differences of opinion.
The lender will approve the loan, draw the loan
documents, and fund the loan.

If we are unable to gain approval with Lender A,
we can take the same package that we have put
together and submit the request to Lenders B, C,
D, etc. if necessary to work toward approval.

Although it may be maddening at times to have
lenders give us so many different opinions and
viewpoints when it comes to getting your loan
approved, it is also the major advantage that I
have in helping you.

If every lender gave us the same answer at all
times, there would be no need to have multiple
sources with which to place your loan request.
So, having some lenders who will say "yes" when
others say "no" is actually a good thing, and
we do our best to find the "yes" lenders as
early in the process as possible.

If you were to apply through a lender's retail
operation, and they said "no", you would have
to generate a new loan request with another
lender. This would take significantly more time
and effort on your part, since you would have
to regenerate the loan application repetitively.
Also, you may have additional fees for duplicate
appraisals of the home since most retail lenders
do not find another lender's appraisals acceptable.

Being able to assist borrowers as a mortgage broker
is a very valuable resource for you. My experience,
my knowledge, and my ability to match your qualifi-
cations to the available loan products saves you
time and trouble at competitive rates and fees.

In addition to mortgage brokerage, I also have
the resources to offer mortgage banking.

Mortgage banking is distinct from mortgage broker-
age because the banking operation allows me to
have the loan underwritten, loan documents prepared,
and the funding of the loan all under the control
of our company.

In this case, we have a select number of lender
relationships, currently about 5-10, that are known
as correspondent lenders.

This means that our company has developed the trust
and the relationship with these lenders for us
to make the loan decision on behalf of the lender.

We have arranged for lines of credit to create
these loans - these are commonly known as warehouse
lines, because after the loan is funded they are
"warehoused" until the lender for whom we created
the loan purchases the loan from our company.

Being able to offer loans within a correspondent
lending relationship gives me the added ability
to have your file move more efficiently through
the process. I have more access to the underwriter,
the document preparation person and the funder of
the loan to try to facilitate special situations
or timing issues.

In today's lending environment, many companies that
were previously able to offer mortgage banking have
had to give it up because their warehouse lines of
credit have not been renewed. Being able to main-
tain these lines of credit requires frequent re-
qualification, and as the mortgage business hit
so many obstacles in the last couple of years,
a lot of companies could not maintain their quali-
fications.

When you are ready to take action to purchase a
home or refinance existing home loans, be sure to
check in with me. My many resources, access to
competitive lending programs, and my 31 years of
experience can be of tremendous benefit to you.